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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Describe how each of the following would affect the U.S. PPF: (a) a war that takes place on U.S. soil, (b) the discovery of a new oil field, (c) a decrease in the unemployment rate, and (d) a law that requires individuals to enter lines of work for which they are not suited.

(a)

To determine

Changes in U.S PPF when war take place.

Explanation

A war taken place in the US soil leads to reduction in capital stock, potential resources and also kills people. This in turn shifts the US’s PPF inward.

Concept

Production possibilities frontier (PPF) curve: PPF curve refers to the combinations of goods and services that can be produced using available resources.

(b)

To determine

Changes in U.S PPF when new oil is discovered.

Explanation

The discovery of new oil field increases the US’s resources. Thus, it shifts the PPF of U.S outward.

(c)

To determine

Changes in U.S PPF when unemployment rate decrease.

Explanation

Decreasing unemployment rate represented by the movement of a point that is below the PPF to another point that is near or on the frontier.

(d)

To determine

Changes in U.S PPF.

Explanation

The new law decreases the productive efficiency of the labor that leads to the movement of a point which is on the frontier to the point that is inside the frontier.

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